Improve your Cash Flow with these 3 ways
Cash flow is everything: Here’s how to improve yours

Whatever the size of your business or organisation, cash flow is the one part of your strategy than can stop you in your tracks – or guarantee success.

While much of the advice SMEs and other businesses are given is valuable, there’s often too much of it that can’t be implemented effectively. We look at three ways to improve your cash flow in a demanding economy.

1. Conduct customer credit checks

One of the biggest issues accounting staff have to face is non-payment by clients. This directly impacts cash flow and means extra time spent on calling, mailing and following up.

In some instances, a client may have a valid reason for missing payment and your company may want to work out a payment plan until the client gets back on their feet.

Where a client skips payments regularly, it may be time to do another credit check. Your accounts department should be conducting credit checks on all clients before creating their accounts with your company, but over the years their situation may change and it’s best to keep up with their current payment practices.

How to run a credit check in South Africa

There are various online providers of credit checks, and one such is Experian, which enables a business of any size to check on a client’s viability by simply filling in a form.

2. Offer discounts for early payment

Offering a discount for payment on or before the 2th of the month can ensure your cash flow looks healthy in time for end-of-month bank interest charges.

While no company wants to take less than their worth, sometimes cutting according to the cloth and making allowances for a touch financial market pays off. Look at what your customer pays on a monthly basis, and see if a percentage “reward” of anything from 1% to 5% for early payment will assist with your cash flow while giving good customers an opportunity to save.

How to implement your client reward

Write a personalised note to the head of the company you would like to approach, telling him or her that they have been chosen, as a valued client, to be eligible for a discount for early payment of their accounts. Explain that your company is offering this as a win-win solution to saving them money while allowing you to maintain a healthy cash flow which ultimately goes back into the economy of the industry you serve.

3. Choose the best payment option for you and your clients

According to the Payments Association of South Africa (PASA), millions of payments are made by South African citizens and businesses daily. We now have a broad variety of payment choices, ranging from cash to electronic payments such as credit/debit cards, debit orders, mobile payments and real-time online internet payments.

Every day more than R 576 billion is settled through the National Payment System (NPS). Consumers, SMEs and corporates have a choice of about 18 different payment systems, which jointly form part of the NPS. These payment systems are governed and regulated by PASA. All these payment instructions are eventually settled at the South African Reserve Bank (SARB).

To determine the best payment option to ensure a healthy cash flow, ask yourself these questions:

  • Which payment offering would I find most convenient for my business?
  • How much will each payment system cost my business and my clients?
  • Which system is most likely to maintain my cash flow?
  • What sort of protection does a payment system give me/my clients?

As the global payment landscape continues to change the face of banking and the financial sector in South Africa, companies of all sizes must keep up with changes that can improve their cash flow, while enhancing their service to clients.